How is LIBOR going up?

[Will Hunting]

Over the last two weeks, 30 day LIBOR has gone from 0.61% to 1.02% at a time when we’re entering a giant recession, treasury rates are at all time lows, and the fed is pumping a record amount of cheap money into the economy. It makes no fucking sense that LIBOR rates are going up.

This screams pricing manipulation by banks that have trillions in outstanding floating rate debt which is tied to LIBOR and loses a huge chunk of profitability if LIBOR returns to record lows.

Before anyone calls me crazy, banks literally did the same fucking thing in 2012 when LIBOR was dangerously close to zero, so this is by no means outside the realm of possibility.

[Millennial_Messiah]

Brexit + artificial crap from the government.

[Will Hunting]

Brexit + artificial crap from the government.
Yeah this has nothing to do with brexit. Try again you fucking mongoloid.

[Winehole23]

Over the last two weeks, 30 day LIBOR has gone from 0.61% to 1.02% at a time when we’re entering a giant recession, treasury rates are at all time lows, and the fed is pumping a record amount of cheap money into the economy. It makes no fucking sense that LIBOR rates are going up.

This screams pricing manipulation by banks that have trillions in outstanding floating rate debt which is tied to LIBOR and loses a huge chunk of profitability if LIBOR returns to record lows.

Before anyone calls me crazy, banks literally did the same fucking thing in 2012 when LIBOR was dangerously close to zero, so this is by no means outside the realm of possibility.Not an easy question to answer.

Here's a recent Fitch article on Libor.

https://www.fitchratings.com/research/structured-finance/lev-loan-libor-floors-help-us-clo-notes-in-low-rate-environment-01-04-2020

Apparently LIBOR will cease to be the benchmark in Sept -Oct. The goldbugs at Seeking Alpha seem to think that a spell of"gold backwardation" will result in the end of fiat money and a de facto global gold standard.

https://seekingalpha.com/article/4334938-gold-market-be-to-snap-watch-gofo

[DMC]

I was stationed in Libor, they've always been untrustworthy.

Cannot believe we haven't put sanctions on them

THIS IS FUCKING BULLSHIT!

[SnakeBoy]

The goldbugs at Seeking Alpha seem to think that a spell of"gold backwardation" will result in the end of fiat money and a de facto global gold standard.

https://seekingalpha.com/article/4334938-gold-market-be-to-snap-watch-gofo

An article by a self educated libertarian "austrian economist". Just clicking on the link I could smell the Ron Paul stink through my computer :lol

[Winehole23]

An article by a self educated libertarian "austrian economist". Just clicking on the link I could smell the Ron Paul stink through my computer :lolThere's not a lot of contemporaneous commentary on LIBOR that I could find, what you got?

[pgardn]

I was stationed in Libor, they've always been untrustworthy.

Cannot believe we haven't put sanctions on them

THIS IS FUCKING BULLSHIT!

a real knee-slapper...

[phxspurfan]

Not sure, but likely just greed by banks who are increasing lending rates while the fed rates everywhere are at / near zero, or maybe negative. They always make money on the spread. What they get it for versus what they get to lend it out.

[Will Hunting]

Not sure, but likely just greed by banks who are increasing lending rates while the fed rates everywhere are at / near zero, or maybe negative. They always make money on the spread. What they get it for versus what they get to lend it out.
Jesus how do so few people understand basics behind how the interest rate most widely used in the whole fucking world works?

[Winehole23]

Jesus how do so few people understand basics behind how the interest rate most widely used in the whole fucking world works?Don't hoard the knowledge, tell us how it works. Or is supposed to work.

[ElNono]

Over the last two weeks, 30 day LIBOR has gone from 0.61% to 1.02% at a time when we’re entering a giant recession, treasury rates are at all time lows, and the fed is pumping a record amount of cheap money into the economy. It makes no fucking sense that LIBOR rates are going up.

This screams pricing manipulation by banks that have trillions in outstanding floating rate debt which is tied to LIBOR and loses a huge chunk of profitability if LIBOR returns to record lows.

Before anyone calls me crazy, banks literally did the same fucking thing in 2012 when LIBOR was dangerously close to zero, so this is by no means outside the realm of possibility.

IIRC, most everybody is moving away from LIBOR by 2021 as a rate benchmark, so banks might just be trying to milk out the last bit they can.

[Will Hunting]

Don't hoard the knowledge, tell us how it works.
For starters, it’s supposed to be the rate banks are willing to lend to each other at, not the rate banks are lending to outside parties at. The way it’s calculcated is by taking a daily survey of the 18 largest banks that operate in London what they’re able to borrow at, dropping the highest and lowest 4 numbers, then averaging the middle 10. The problem is that it’s not like the 18 numbers given by each bank are vetted, it’s basically done on scout’s honor.

In other words, it’s extremely vulnerable to price manipulation. Good thing it’s going away in 2021.

[Will Hunting]

IIRC, most everybody is moving away from LIBOR by 2021 as a rate benchmark, so banks might just be trying to milk out the last bit they can.
Yeah it’s completely going away at the end of 2021. It’s going to be chaos fighting over the index rate that’s going to be used in lieu of LIBOR for the hundreds of trillions (not a typo, hundreds of trillions) of derivative instruments and debt that are currently tied to LIBOR.

[ElNono]

Yeah it’s completely going away at the end of 2021. It’s going to be chaos fighting over the index rate that’s going to be used in lieu of LIBOR for the hundreds of trillions (not a typo, hundreds of trillions) of derivative instruments and debt that are currently tied to LIBOR.

I heard it's been a headache already trying to find something. Also, isn't LIBOR used all over the world? I get that the US is injecting liquidity, but US banks might be milking that when lending to overseas banks?

[Winehole23]

For starters, it’s supposed to be the rate banks are willing to lend to each other at, not the rate banks are lending to outside parties at. The way it’s calculcated is by taking a daily survey of the 18 largest banks that operate in London what they’re able to borrow at, dropping the highest and lowest 4 numbers, then averaging the middle 10. The problem is that it’s not like the 18 numbers given by each bank are vetted, it’s basically done on scout’s honor.

In other words, it’s extremely vulnerable to price manipulation. Good thing it’s going away in 2021.Thanks.

LIBOR manipulation did happen after the 2008-9 bust. I thought it was a big deal at the time, but this board mostly yawned and moved on.

[Will Hunting]

I heard it's been a headache already trying to find something. Also, isn't LIBOR used all over the world? I get that the US is injecting liquidity, but US banks might be milking that when lending to overseas banks?
It’s all over the world but this is USD LIBOR I’m talking about (there are different LIBOR rates for different currencies), so the fed pumping money into the economy should be depressing USD LIBOR either way.

[ElNono]

It’s all over the world but this is USD LIBOR I’m talking about (there are different LIBOR rates for different currencies), so the fed pumping money into the economy should be depressing USD LIBOR either way.

right, I've seen the term IBOR before too. I know the L was for London, thus why I wasn't sure. Yeah, I really can't think of anything else, other than making it look like there's not enough liquidity to force the fed to unload the entire 4 trillion... (which would be perverse, but it's banks we're talking about here)

[Will Hunting]

Thanks.

LIBOR manipulation did happen after the 2008-9 bust. I thought it was a big deal at the time, but this board mostly yawned and moved on.
Yeah not just this board but the whole country. When people cry about how the financial services industry rips this country off it’s somewhat because the delta of knowledge is so god damn wide. LIBOR rigging should have resulted in thousands of lawsuits from consumers and businesses who’s borrowing costs were improperly inflated.

The nine figure fine Barclays got was more of an encouragement of future rigging than a deterrent. Rigging LIBOR even 10-20 BPS is worth billions over the course of a year.

[picnroll]

Over the last two weeks, 30 day LIBOR has gone from 0.61% to 1.02% at a time when we’re entering a giant recession, treasury rates are at all time lows, and the fed is pumping a record amount of cheap money into the economy. It makes no fucking sense that LIBOR rates are going up.

This screams pricing manipulation by banks that have trillions in outstanding floating rate debt which is tied to LIBOR and loses a huge chunk of profitability if LIBOR returns to record lows.

Before anyone calls me crazy, banks literally did the same fucking thing in 2012 when LIBOR was dangerously close to zero, so this is by no means outside the realm of possibility.


Banks’ reluctance to lend to each other driving rates up?

[Will Hunting]

Banks’ reluctance to lend to each other driving rates up?
The way it’s surveyed is they’re basically asking each bank what it’d be willing to borrow at from the other banks. Logically, if the fed is giving them an unlimited supply of dirt cheap money, the rate they’d be willing to borrow at from other banks would shrink (why borrow from another bank if you have access to unlimited Fed liquidity).

[Winehole23]

Yeah not just this board but the whole country. When people cry about how the financial services industry rips this country off it’s somewhat because the delta of knowledge is so god damn wide. LIBOR rigging should have resulted in thousands of lawsuits from consumers and businesses who’s borrowing costs were improperly inflated.Finance, banking and accounting standards aren't widely understood (I'm certainly no expert on these), so maybe for this reason it's hard to get people to pay attention to the details.

Those details are technical, legal and professional. Takes some study, and a lot of listening, to begin to have some concrete notion of what one doesn't understand.

It's hard to pissed off by a swindle that you don't understand, when you don't *feel* the damage and the people bitching about it loudest can't really explain it either.

[Winehole23]

At this point, we're having a hardcore loss of trust in government and institutions, in the teeth of an historic pandemic.

[RandomGuy]

Over the last two weeks, 30 day LIBOR has gone from 0.61% to 1.02% at a time when we’re entering a giant recession, treasury rates are at all time lows, and the fed is pumping a record amount of cheap money into the economy. It makes no fucking sense that LIBOR rates are going up.

This screams pricing manipulation by banks that have trillions in outstanding floating rate debt which is tied to LIBOR and loses a huge chunk of profitability if LIBOR returns to record lows.

Before anyone calls me crazy, banks literally did the same fucking thing in 2012 when LIBOR was dangerously close to zero, so this is by no means outside the realm of possibility.

Few problems from teh financial crunch actually got fixed. Would not surprise me that this didn't either.

Bears looking into tho.